Explained | What does Tornado Cash sanction mean for future of DeFi

moneycontrol.com:

US Secretary of State Antony Blinken said on August 8 that the Biden administration would sanction Tornado Cash, a Decentralized Finance (De-Fi) programme on the Ethereum blockchain that enables the anonymous movement of cryptocurrency.

The move has sparked fury in the crypto world because of both the logic behind it and the manner in which it was being carried out. The move may signal a significant government crackdown on the space.

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Let us examine the circumstances behind the sanction and what it could mean for the future of decentralized finance, an emerging financial technology based on secure distributed ledgers akin to those used by cryptocurrency.

What is Tornado Cash

One of the first completely decentralized apps on Ethereum to support private transactions, Tornado Cash was released in 2019.

It first accepted user payments, combined them into one address, and then let users withdraw their money and move it to a second Ethereum address.

The mix of Ethereum addresses meant that the original owner could not be identified.

Tornado Cash provided a mechanism for those who valued their privacy to use and invest in cryptocurrencies without having their transactions made public on Ethereum, which makes every transaction public by default.

Reasons behind the sanction

Over $7 billion in user money has been mixed with the aid of Tornado Cash so far.

However, some major hacks have utilized the site to launder stolen money even though the bulk of these transactions were entirely genuine and legal.

For instance, Tornado Cash was used to launder the proceeds of the Axie Infinity Ronin Bridge attack, which took place in April 2020 and resulted in the theft of more than $400 million in